Article by Tom Magor - 6th April 2020

How Your Phone Contract Affects Your Credit Report

Some people only really consider their Credit Report and the information it contains when they’re about to apply for a traditional form of borrowing, such as a credit card, loan or mortgage. That's why for some it can come as a bit of a surprise to learn that many of the same checks are involved when attempting to take out a mobile phone contract.

Not only that, but the way you make repayments on a phone contract can have a big impact on your ability to obtain credit elsewhere in the future.

Using your Credit Report to get a mobile phone contract

As smartphones continue to evolve, the price that manufacturers can charge for handsets is also on the rise. That means that for the latest models (and even a lot of older ones), consumers are required to pay an up-front fee for the phone itself, in addition to a long-term contract.

Ongoing monthly payments are designed to cover any remaining cost relating to the handset, as well as service usage which incorporates calls, texts and data. This monthly fee can be considered a form of credit, as payments are made after the usage of the service. Some providers even offer so called 'split contracts' where the two elements are clearly separated – more on that later.

Because it’s a form of credit, you’ll need to pass a credit check before you can be granted a contract phone. Although it should in most cases prove easier to get approved than for other traditional forms of borrowing, it’s still possible to get declined or at the very least have restrictions imposed - such as a bigger up-front fee, or a monthly usage limit.

If a network provider comes across adverse information on your Credit Report, or if you’ve got a very limited Credit History, you may struggle to get accepted for some of the latest phone models. For that reason it’s important to check your Credit Report before you apply, so you can see what the phone provider sees when they are assessing your application.

To see what information mobile providers will see when you make an application, you can try checkmyfile free for 30 days, and just £14.99 a month thereafter.

The decision to accept or decline your application lies solely with the mobile provider that you are applying with. As all lenders and mobile phone providers have their own unique acceptance criteria, they’ll also have differing appetite for ‘risk’ – meaning they will consider the severity of negative information, such as late payments, differently. Many mobile providers will be happy to accept the perceived risk from an applicant with a late payment or two showing on their Credit Report, while particularly stringent ones (especially where you’re looking for the most expensive handsets) may decline the application right away. Without checking your Credit Report for yourself though, you won’t know what information they are basing their decision on.

How does a phone contract affect your Credit Report?

As with any form of borrowing where the onus is on the customer to make monthly payments on time, there is the potential to pay late or miss one completely. If this happens, it’s your Credit Rating (and ability to get further forms of credit in the future) that will suffer, so it’s crucial to ensure that this doesn’t happen.

Any late payments will be recorded, passed to the UK’s Credit Reference Agencies and will be visible to other organisations checking your Credit Report in the future.

Not all contracts are reported in the same way. In some instances, phone suppliers (most notably O2 through its ‘Refresh’ tariff) will report two accounts on your Credit Report. In these cases, the agreement is separated between the cost of the phone itself and the monthly service usage. The handset is technically reported as a loan while the airtime plan might be classed as ‘other’.

An interesting note is that mobile phone contracts aren’t currently incorporated within the Consumer Credit Act. What this means in practice is that a mobile phone provider can report an account to have entered default status when it considers the relationship with the consumer to have broken down. The account doesn’t have to be characterised by a period of arrears and it isn’t mandatory that a Default Notice is served.

Defaults are among the most severe of all negative markers that can appear on your Credit Report and can have a significant effect on your ability to get accepted for credit for the entire six years that they remain visible to prospective lenders. If you think you may have missed mobile phone payments in the past six years, it may be worth checking your Credit Report to make sure that there is nothing that may hinder your finances in the future.

The presence of a mobile phone account on your Credit Report also carries the potential to boost your overall Credit Rating. Providing you manage the mobile account well by ensuring all scheduled payments are made on time and in full, you can expect your Credit Report to be marked with repayment history demonstrating how reliable you are at paying. This positive information is crucial for a healthy Credit Report, meaning a well-managed mobile account can strengthen your Credit Rating.

This positive repayment behaviour is precisely what lenders and mobile phone providers look for when credit checking their would-be customers as it instils them with confidence that you can manage your agreements effectively.

How do I check my Credit Report?

Even if you don’t have reason to think that there could be a late payment recorded against you, it’s worth checking. Errors are rare, but they do happen and checking that everything is as it should be might just save you a lot of time and hassle when you next go to apply for finance.

You can try checkmyfile free for 30 days, then for just £14.99 a month afterwards, which you can cancel at any time online or via phone or email. You’ll get access to the UK’s most detailed Credit Report, with information from all four Credit Reference Agencies, not just one, so you can see exactly what lenders see. You’ll also get full support from our team of professionally qualified Credit Analysts so if you have any issues or queries, you don’t have to go it alone.

Updated 06/04/2020 by Sam Griffin

The UK's First Provider Of Online Credit Reports

Launched 21 Years, 35 Million Credit Scores & 8 Million Credit Reports Ago

The UK's First Provider Of Online Credit Reports

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